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BSES: EPC powers growth

Jul 30, 2001

BSES has declared a 15% growth in 1QFY02 backed by an 11% growth in total operating income. The company's electricity business continued to show steady growth at 6%. It was its EPC business once again, which has grown significantly.

(Rs m) 1QFY01 1QFY02 Change
Sale of electrical energy 5,443 5,793 6.4%
Income from EPC, contracts &
computer division
436 747 71.3%
Total operating income 5,879 6,540 11.2%
Other Income 265 176 -33.6%
Expenditure 4,429 4,968 12.2%
Operating Profit (EBDIT) 1,450 1,572 8.4%
Operating Profit Margin (%) 24.7% 24.0%  
Interest 176 163 -7.1%
Depreciation 475 508 7.0%
Profit before Tax 1,064 1,076 1.2%
Tax 200 80 -60.0%
Profit after Tax/(Loss) 864 996 15.4%
Net profit margin (%) 15.9% 17.2%  
No. of Shares (eoy) (m) 137.8 137.8  
Diluted Earnings per share* 25.1 28.9  
Current P/e ratio   6.8  

In FY01, BSES's bottomline was marred by a 43% jump in the cost of electrical energy purchased (from Tata Power). In the first quarter of FY02 however, the cost of electrical energy has grown by only 2% YoY. This is one of the factors which has added to its bottomline growth.

Lower taxes have also contributed to higher profits. Infact, BSES's profit before tax has shown a marginal 1% growth. The company's Saphale project in Maharashtra has made no headaway and therefore hinders BSES's future growth from sale of electricity. Its distribution business in Orissa is still in the red and would require a couple of years to give returns. Also, given BSES dependence on Tata Power for its electricity requirements it has no real control over those costs.

Cost break-up
(Rs m) 1QFY01 1QFY02 Change
Cost of energy purchased 2,450 2,499 2.0%
Cost of fuel 1,045 1,133 8.3%
Costs related to EPC and others 335 554 65.3%

The company's EPC business meanwhile, continues to deliver growth for the company. In 1QFY02 this business grew by 71%. In FY01 it had grown by over 35% YoY. However, the costs associated with this business have also grown in tandem with the sales growth.

Added to these, in the dispute of standby charges by the Maharashtra Electricity Regulatory Commission, BSES has deposited another Rs 143 m (in addition to Rs 540 m deposited in FY01). The concern is that the company has not acknowledged this liability and has made no provisions towards it. One must remember that the decision in this dispute may not be in favour of BSES. The liability, if it arises, would result in a one time hit to the company.

At Rs 196 the stock trades at a P/e of 7 times its annualised 1QFY02 earnings.

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